State high court mulls whether confidential settlements bind attorneys

In a case that could affect how attorneys handle settlements in California, the state Supreme Court heard arguments on the degree to which attorneys are bound by confidentiality agreements in agreements they negotiate for their clients.

Though confidential settlements commonly conclude cases, Shook Hardy & Bacon LLP partner Frank C. Rothrock, arguing on behalf of plaintiff Monster Energy Company, described the precedential landscape as "pretty barren," prompting practical, policy arguments to attract the focus of the discussion.

Rothrock repeated one such argument, at the core of his client's suit against Parris Law Firm and Bruce Schechter who, Monster alleges, disclosed settlement information to a reporter after resolving a products liability and wrongful death action against the energy drink company.

"What's the point of having a confidentially agreement if it is not enforced?" Rothrock asked. "If you settle cases, it's reasonable that you need to send a message; you take those confidentiality provisions seriously."

But Margaret M. Grignon, partner with the Grignon Law Firm, argued that a settlement's substantive provisions only bind parties to the agreement, not attorneys who negotiate those terms. That's the case, Grignon argued, even where an attorney also signs an agreement, as Schechter did in this case, specifically to approve of the "form and content" of the settlement.

"All you have is attorneys approving as to form and content," Grignon argued. "There is no manifestation of consent. No case in the country has ever imposed substantive obligations against an attorney for approving a contract as to form and substance."

Schechter represented the parents of Anais Fournier, a 14-year-old who died in 2011 after drinking two 24-ounce Monster Energy drinks. The parents and Monster finalized a settlement in 2015, which purported to bind both "Plaintiffs and their counsel ... to not publicly disclose to any person" information about the suit's culmination, beyond saying the matter had "been resolved."

But Monster alleged that Schechter went further than that, by telling a reporter for a legal blog the settlement netted the girl's family "substantial dollars." When the blog posted Schechter's comment, Monster sued Schechter and his firm for breaching the terms of the confidentiality agreement. Monster Energy Company v. Schechter (Bruce L.) et al., S251392.

Monster argued the confidentiality provisions "were worthless if not binding on both [a]ttorneys and their clients," and, more critically, that Schechter's signature effectively bound him to the provisions' terms. The 4th District Court of Appeal disagreed as to the latter, and ordered the trial court to grant Schechter's anti-SLAPP motion.

On Tuesday, Justice Joshua Groban posited that perhaps the appellate panel's result was sound, since attorneys aren't generally regarded as part of the settlement agreements they arrange for their clients.

"[Holding that] merely an attorney signing he approves the form and content [binds] an attorney to every provision in the agreement would come as a shock to the bar around the state," Groban said. "Now the attorney is suddenly required ... to finish paving the driveway? What are the limiting principles?"

Grignon added that constraints on attorney disclosures make allowing for liability in cases like Monster's unnecessary. Attorneys owe a duty of conidentiality to their clients, which, she said, makes remedies available both to an attorney's clients if violated as well as the State Bar.

But Justice Carol Corrigan wondered whether such deterrents sufficed, and whether an alternative remedy discussed, whereby Monster could sue the parents for Schechter's actions, was likewise lacking.

"It is cold comfort to Monster ... to say that [ethical obligations] bar Mr. Schechter," Corrigan said.

"And also suing the parents of this deceased youngster to enforce the agreement they agreed to and paid a substantial sum for; cold comfort again," she added. "So are we crafting a remedy that is a loser from Monster's point of view?"

Rothrock concurred.

"What attorneys are arguing is that there is no remedy for Monster other than suing the parents of a 14-year-old girl who died," he said. "That obviously was not the intent of the parties."

If the appeals' outcome remains uncertain, it seems clear enough that the resolution will affect many attorneys and settlements in the state.

"A decision here could impact I don't know how many settlement agreements," Rothrock noted. "I think a lot of lawyers are looking back through their files."